Uniform Industry News

January 16, 2009 (RetailWire) - Amid the financial crisis and global economic slow down, some observers are betting that the powerful rush towards globalization will slow dramatically and perhaps even reverse itself.

Indeed, there were some indications this was happening even before the brewing financial crisis kicked into high gear. 

Now, some companies are seeing their Chinese suppliers disappear, as tens of thousands of manufacturers in China shut their doors.

"There are some changes going on for sure, but not as dramatic as some of the reports would have you believe," said Gene Tyndall, executive vice president at Tompkins Associates and a SCDigest contributing editor.

"There is a lot of news - and rumors - about thousands of China factories closing and assertions that North American and European multi-nationals are bringing sourcing and production back, but that trend is being over exaggerated," Mr. Tyndall said.

The trend is both a matter of degree and Chinese Government policy, Mr. Tyndall said.

For example, while thousands of Chinese factories are closing, 98 percent are for low-end commodities that the government there wants to transition out of anyway, Mr. Tyndall said.

He also said more of those closings are related to the economic downturn and not due to the supply chain strategies of the multi-nationals.

"We continue to see a lot of activity in China for both sourcing and distribution," Tyndall. "The multi-nationals know that the only sales growth in the near-term will be in emerging markets."

He also notes that China continues to invest in infrastructure and new plants that make high-end components and products, and that the Chinese government has recently announced a series of stimulus plans to build out still more infrastructure and stoke export business, which is still positive but currently well down in terms of the growth it enjoyed over the past few years.

Mr. Tyndall said, however, he is seeing some trends towards greater sourcing diversification to low-cost countries outside of China. "We're seeing interest in Mexico, Eastern Europe, and Brazil, depending on the industry."

While globalization is here to stay, Mr. Tyndall said, the current dislocation does provide an opportunity to rethink global supply chain strategies.

"To me, the winners coming out of the recession will be those companies that have planned and established a new business model -- one that yields the lowest Total Delivered Cost to their customers, no matter where they are located," Mr. Tyndall said